Introduction
On 8th of November 2023, the Financial Services Authority ("OJK") issued a Circular Letter No. 19/SEOJK.06/2023 on the Organization of Information Technology-Based Co-Funding Services ("SE OJK 19/2023"), which is a derivative regulation of OJK Regulation No. 10/POJK.05/2022 on Information Technology-Based Co-Funding Services ("POJK 10/2022") issued in 2022. Amidst the growing activities of Information Technology-Based Co-Funding Services ("P2P Lending"), which has been accompanied by a high level of non-performing loans, this new Circular aims to provide clarity on the magnitude of economic benefits, interest rates, as well as consumer protection and personal data protection within P2P Lending.
Enhancement of Borrowers Protection
One of the concerns in the implementation of P2P Lending is the imbalance in the bargaining position of the borrower against the fund provider, which often leads to "conflicts" or threats due to default. In response to such issues, SE OJK 19/2023 regulates several aspects that directly impact the interests of the borrower as the consumer, including:
Reduction of Economic Benefits Maximum Limit
Article VI, number 3 of SE OJK 19/2023 stipulates that the economic benefits, including interest/margin/profit-sharing, will be gradually decreasing. Starting from the 1st of January 2024, the maximum economic benefit for productive funding is 0.1%, and 0.3% for consumptive funding per calendar day based on the funded amount stated in the funding agreement. As of 1st of January 2026 and later, the maximum economic benefit will be decreased to 0.067% for productive funding and 0.2% for consumptive funding.
Reduction of Penalty Maximum Limit
Article VI, number 4 of SE OJK 19/2023 stipulates that the late penalty rate will also be gradually decreasing, similar to the economic benefit rate. Starting from the 1st of January 2024, the default penalty rate is 0.1% per calendar day from the debit balance of the productive funding. This rate will be decreased to 0.067%, starting from 1st of January 2026.
Meanwhile, for consumptive funding, the reduction in the penalty rate is carried out in three phases. In the first phase, which lasts for one year starting from the 1st of January 2024, the penalty rate is 0.3%. From the 1st of January 2025, the rate will be decreased to 0.2% and the final rate as of the 1st of January 2026 is 0.1%.
Borrower's Loan Limit
With the issuance of SE OJK 19/2023, as stipulated in Article IV number 3 letter j, the P2P Lending provider is required to ensure that the borrower does not receive loan/funding from more than 3 (three) providers. The amount of the loan/funding is also adjusted based on the borrower's income to ensure repayment capacity with assessment standards:
- For the first year after the issuance of SE OJK 19/2023, the maximum consumptive funding (principal and economic benefits) is 50% of the borrower's income;
- For the second year after the issuance of SE OJK 19/2023, the maximum consumptive funding is 40% of the borrower's income;
- For the third year after the issuance of SE OJK 19/2023, the maximum consumptive funding is 30% of the borrower's income.
Debt Collection Ethics
SE OJK 19/2023 completes the provisions regarding the technical proceedings and ethics of debt collection, especially those carried out by debt collectors, which were not explicitly regulated under POJK 10/2022 or in other previous OJK regulations. Article XI SE OJK 19/2023 requires the provider to initially inform the borrower regarding the due date. In the event of default, the first form of collection that must be carried out is by providing a warning letter. Collection can be done through desk collection, which is non-face-to-face (via messages, phone calls, video calls, etc.), and field collection, which is face-to-face. The Debt collector is required to undergo adequate training.
The ethics of debt collection regulated in Article XI number 5 SE OJK 19/2023 include:
- Carrying an official identification card;
- Avoiding the use of threats, violence, and/or actions that are humiliating to borrowers;
- Avoiding the use of physical or verbal pressure;
- Avoiding the use of words and/or actions that intimidate and degrade based on race, ethnicity, and religion, preserving dignity both in the physical and virtual realms.
- Debt collection is only directed towards the fund borrower, not towards others, including emergency contacts;
- Debt collection through communication channels should not be carried out intensely and disturbingly;
- Debt collection can only be conducted through personal channels at the borrower's residence from 08:00 to 20:00.
Personal Data Protection
Article VIII of SE OJK 19/2023 stipulates that the provider is not allowed to disclose any personal data and information of the platform user, to third parties. The provider can only access the camera, location, and microphone of platform users after the provider obtains the user's consent. As required by POJK 10/2022, the provider must maintain the confidentiality of the personal data. Additionally, SE OJK 19/2023 requires the destruction of personal data including personal data that meets retention requirements based on regulations and audit interests, and data that cannot be reused.
Moreover, Article XII SE OJK 19/2023 stipulates that the use of emergency contacts is solely intended for confirming the presence of the borrower and shall not be utilized to collect loan/funding from the owner of the emergency contact data. Lastly, OJK also issued provisions regarding providers' obligations to respect emergency contact data, whereby the providers must confirm and obtain approval from the owner of the emergency contact data for the use of such emergency contacts.
Conclusion
In general, the issuance of SE OJK 19/2023 provides better and fairer rules, addressing the shortcomings in the implementation of P2P Lending in Indonesia that had recently gained attention due to the increasing debt values in the public, particularly provisions to enhance the consumer protection and personal data security.
The compliance of P2P Lending providers in fulfilling the obligations stipulated in SE OJK 19/2023 assumes the presence of more rigorous and stringent supervision and enforcement from OJK, especially regarding the provisions related to debt collectors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
